RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/231 
5 May 2010  
 
(10-2411) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
MALAWI 
 
  
 
This report, prepared for the second Trad e Policy Review of Malawi, has been 
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has, 
as required by the Agreement establishing the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), sought clarification from Malawi on its trade policies and 
practices. 
 
Any technical questions arising from this report may be addressed to 
Mr. Thomas Friedheim (tel:  022 739 5083), and Mr. Usman Ali Khilji 
(tel: 022 739 6936). 
 
Document WT/TPR/G/231 contains the policy statement submitted by Malawi. 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Malawi. Malawi WT/TPR/S/231 
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CONTENTS 
 
 Page 
SUMMARY   vii 
I. ECONOMIC ENVIRONMENT 1 
 (1) I NTRODUCTION  1 
 (2) R ECENT ECONOMIC DEVELOPMENTS  2 
 (i) Trade-related macroeconomic policies 3 
 (3) B ALANCE OF PAYMENTS  4 
 (4) D EVELOPMENTS IN TRADE  6 
 (i) Composition of trade 6 
 (ii) Direction of trade 6 
 (5) F OREIGN DIRECT INVESTMENT  7 
II. TRADE AND INVESTMENT POLICY FRAMEWORK 10 
(1) G ENERAL INSTITUTIONAL AND LEGAL FRAMEWORK  10 
 (2) P ARTICIPATION IN THE WORLD TRADE ORGANIZATION  10 
 (3) P REFERENTIAL TRADE AGREEMENTS AND ARRANGEMENTS  11 
 (i) Bilateral trade agreements 11 
 (ii) Regional trade agreements 11 
 (iii) Other preferential trade arrangements 12 
 (4) I NVESTMENT FRAMEWORK  13 
III. TRADE POLICIES AND PRACTICES BY MEASURE 15 
 (1) M EASURES DIRECTLY AFFECTING IMPORTS  15 
 (i) Registration, documentation, and customs procedures 15  (ii) Customs clearance 16 
 (iii) Tariffs 16 
 (iv) Rules of origin 22  (v) Other duties and taxes 23 
 (vi) Import prohibitions, restrictions, and licensing 23 
 (vii) Anti-dumping, countervailing, and safeguard measures 24  (viii) Standards and other technical requirements 25 
 (2) M
EASURES DIRECTLY AFFECTING EXPORTS  28 
 (i) Registration and documentation 28  (ii) Export taxes, charges, and levies 28 
 (iii) Export prohibitions, controls, and licensing 28 
 (iv) Export assistance 29  (v) Export-processing zones 29 
 (3) I
NTERNAL MEASURES  30 
 (i) Incentives 30 
 (ii) Internal taxes 30 
 (iii) Competition policy 31  (iv) Government procurement 32 
 (v) Local-content requirements 34 
 (vi) State-owned enterprises and privatization 34  (vii) Price controls and monitoring 35 
 (viii) Intellectual property rights 36 WT/TPR/S/231 Trade Policy Review 
Page iv 
 
 
 Page 
IV. TRADE POLICIES BY SECTOR 38 
 (1) A GRICULTURE  38 
 (i) General features and policy framework 38  (ii) Selected agricultural products 39 
 (2) E
NERGY   44 
 (i) Electricity 44  (ii) Petroleum and gas 46 
 (3) F
INANCIAL SERVICES  46 
 (4) T ELECOMMUNICATIONS  49 
 (i) Institutional and legal framework 49 
 (ii) Selected issues 49 
 (5) T RANSPORT  50 
 (i) Institutional and legal framework 50 
 (ii) Transit corridors 52 
V. AID FOR TRADE 54 
 (1) O VERVIEW          5 4  
 (2) M AINSTREAMING TRADE INTO NATIONAL DEVELOPMENT STRATEGIES    54 
 (i) Vision 2020 and the Malawi Growth and Development Strategy 54 
 (ii) The integrated framework 55 
  (iii) Supply side and trade-related infrastructure constraints   55 
  (iv) Specific trade-related t echnical assistance needs    56 
 (3) A ID FOR TRADE SUPPORT TO MALAWI       5 7  
 (4) B RIDGING DEMAND AND RESPONSE        6 0  
 (i) National coordination mechanisms 60 
 (ii) Monitoring and evaluation 61 
 
REFERENCES   63 
APPENDIX TABLES  65 
 Malawi WT/TPR/S/231 
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CHARTS 
 Page 
I. ECONOMIC ENVIRONMENT 
 I.1 Structure of merchandise trade, 2003 and 2008 8 
I.2 Direction of merchandise trade, 2003 and 2008 9 
 III. TRADE POLICIES AND PRACTICES BY MEASURE 
 
III.1 Breakdown of tariff rates, 2009 18 III.2 Tariff escalation by ISIC 2-digit industry, 2009 20 
 
TABLES 
 
I. ECONOMIC ENVIRONMENT 
 I.1 Selected macroeconomi c indicators, 2003-09 1 
I.2 Basic economic and soci al indicators, 2003-09 3 
I.3 Balance of payments, 2003-09 5 
I.4 Foreign direct investment in Malawi, 2005-08 7 
 III. TRADE POLICIES AND PRACTICES BY MEASURE 
 
III.1 Structure of the MFN tariffs in Malawi, 2009 17
 
III.2 Summary analysis of MFN tariff, 2009 18 
III.3 Summary analysis of Malawi's  MFN and preferences tariffs, 2009 21 
III.4 Licensing requirements 24 III.5 Government procurement methods, 2010 33 
III.6 State-owned enterprises, 2010 35
 
 
IV. TRADE POLICIES BY SECTOR 
 
IV.1 Production of selected agricultural products, 2002/09 40 IV.2 Transport corridors 52 
 
V. AID FOR TRADE  
V.1 Aid-for-Trade Flows:  CRS Proxies 58 
V.2 Donor operations  59 
 
APPENDIX TABLES 
 
I. ECONOMIC ENVIRONMENT 
 AI.1 Structure of imports, 2003-08       67 
AI.2 Structure of exports, including re-exports, 2003-08 68 
AI.3 Origins of imports, 2003-08     69 AI.4 Destination of exports including re-exports, 2003-08     70 
 
IV. TRADE POLICIES BY SECTOR  
AIV.1 Applied MFN tariffs by ISIC Rev.2 category, 2009 71 
  Malawi WT/TPR/S/231 
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SUMMARY 
1. Since the last TPR in 2002, Malawi 
has made progress in reforming its trade policy regime in the areas of customs procedures, 
competition policy, government procurement, 
and privatization of some state-owned enterprises.  While the Government recognizes the need for further re forms of the business 
environment to attract investment, many of 
Malawi's trade-related laws are outdated and 
require extensive revision to align them with international best practice.  Reform efforts should now also focus on simplifying Malawi's tariff together with its exemption schemes.  Moreover, further trade facilitation 
measures are needed to help reduce Malawi's 
high cost of transport. 
2. Malawi's economy is heavily 
dependent on agriculture and exports of primary commodities.  Trade in goods and 
(non-factor) services rose from 67% of GDP in 
2003 to 83% of GDP in 2009, reflecting increased reliance on trade.  Malawi has not retreated from its open policy stance in response to the recent global economic crisis.  
3. Since 2003, real GDP growth has 
averaged 6.3% per year, and reached 7.7% in 
2009.  Despite the robust growth, Malawi still has an extremely low per capita income (approximately US$356 in 2009), high prevalence of absolute poverty, and a high 
reliance on donor funds (about 40% of budget 
expenditures).  The macroeconomic situation remains precarious.  There has been considerable rigidity in the exchange rate of the Malawi kwacha, resulting in an over-
valued currency and dwindling foreign 
exchange reserves.  There have been periods when acute foreign exchange shortage has adversely affected Malawi's external trade. 
4. The performance of Malawi's 
economy remains vulnerable to drought, and 
terms of trade shocks.  Production and exports 
need to be diversified so that growth is less dependent on exogenous factors, such as the weather.  In this regard, the opening of Malawi's first uranium mine at Kayelekera, the largest FDI project in recent years, is a 
welcome development.  Malawi is open to foreign investment and offers EPZ status for non-traditional exports.  Procedures for 
business and land registration, and for 
obtaining work permits are being streamlined. 
5. Customs procedures have been 
modernized using UNCTAD's Automated System for Customs Data (ASYCUDA) and 
post-clearance audits, but a large proportion of 
import shipments is still subject to physical inspection at the border.  On some products, Malawi applies non-automatic licensing procedures for purposes of infant industry protection (e.g. sugar and wheat flour), and for 
health, safety, security, and environmental 
reasons. 
6. Malawi's tariff bindings average 
76.5%, covering 31% of the tariff lines.  The applied MFN rate averaged 13.1% in 2009 
(compared with a simple average rate of 
13.6% in 2001).  The applied MFN tariff has six bands, with a maximum rate of 25%.  Malawi's tariff is complex because of numerous exemption schemes.  The discretionary and non-transparent nature of 
these schemes also leave room for abuse.  
Malawi would stand to benefit from a rigorous tariff simplification exercise:  a lower and more uniform tariff without exemptions would promote economic efficiency, reduce 
administrative costs, and possibly raise more 
tariff revenues.  
7. The prevalence of preferential rates 
adds to the complexity of Malawi's tariff.  Malawi is a member of the Common Market 
for Eastern and Southern Africa (COMESA) 
and the Southern African Development Community (SADC), which have different speeds in terms of tariff elimination.  Imports from South Africa – Malawi's main trading partner – are governed by a separate schedule 
of tariff elimination. 
8. Substantial progress has been made in 
implementing competition legislation, with the review by Malawi's competition commission of a series of merger and acquisition cases.  WT/TPR/S/231 Trade Policy Review 
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Malawi's competition regime should also 
receive a boost through the establishment of COMESA's regional competition commission in the country. 
9. Malawi has experienced several food 
emergencies in recent years;  large parts of the population received international food aid in 2005.  Accordingly, agricultural development and food security are policy priorities of the 
Government.  Maize is the principal food and 
subsistence crop, and central to the food security strategy.  Like other countries in the region, Malawi has resorted to export restrictions in response to food shortages.  To stimulate maize production, the Government 
has implemented a large-scale programme to 
subsidize fertilizers for maize and other agricultural inputs (Farm Input Subsidy Programme).  Overall, the programme, together with favourable rainfall, has been a 
success in restoring food security. 
10. The Farm Input Subsidy Programme 
has become a considerable fiscal and economic burden.  Budgetary expenditures reached a peak of about US$270 million in 2008/09 (close to 5% of GDP), to shield 
smallholders from escal ating international 
fertilizer prices.  Expenditures are partly covered by dedicated budget support from the donor community.  In part, the fertilizer subsidies thus constitute fertilizer aid, clearly a 
more efficient form of aid than food aid.  
However, as fertilizer subsidies absorb large 
proportions of Malawi's agricultural budget, there is little room for investments with potentially higher long-term rates of return 
than fertilizer subsidies, such as agricultural 
research, irrigation, or measures to reduce maize-crop losses.  
11. The tobacco industry contributes over 
60% of foreign exchange earnings.  While Malawi is rightly exploiting its comparative 
advantage in producing tobacco, it is 
vulnerable to tobacco control measures that other countries may implement for public health reasons.  Cotton being one of its main export products, Malawi has a particular 
interest in the DDA negotiations on the elimination of trade-distorting domestic 
support and export subsidies in this sector. 
12. Services account for slightly less than 
half of the Malawi's GDP, led by 
wholesale/retail services, and financial 
services.  Under the GATS, Malawi has made specific commitments in 33 (out of some 160) service sectors, which is slightly more than the average in least developed countries.  Malawi's 
commitments have no limitations on market 
access or national treatment in modes 1 to 3, while measures affecting the presence of natural persons are unbound. 
13. Malawi's financial system is stable and 
has weathered the turmoil in the international 
financial markets.  Malawi is in the process of 
modernizing its legislation for financial services and consolidating supervisory powers under the Reserve Bank of Malawi.  However, the vast majority of the population does not 
have access to commercial banking services. 
14. Telecom services have been further 
liberalized since Malawi's last TPR.  The penetration rate for m obile telephone services 
increased from 0.7% in 2002 to 12.5% in 2008, but remains among the lowest in Africa.  
The need for enhanced competition among 
operators by awarding additional operator licences has been recogn ized.  The internet 
user rate is very low, especially the broadband subscriber rate (estimated at 0.02% in 2008).  
Infrastructure projects are under way to 
increase bandwidth supply but Malawi has yet to link up with the rest of the world via East African submarine cable systems, which promise faster and cheaper internet access.  
15. One of the main growth constraints in 
Malawi is a significant shortfall in electricity supply.  Malawi lacks a transmission infrastructure for importing electricity.  It is one of the few SADC countries not yet connected to the regional grid, the Southern 
African Power Pool (SAPP).  As a land-locked 
country, Malawi naturally faces high transport costs, which impede its export competitiveness directly but also indirectly when the production of export goods requires imported Malawi WT/TPR/S/231 
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inputs.  Trade facilitation, e.g. through one-
stop border posts, is thus vital for Malawi to reduce the administrative costs associated with trading across borders.  While regional road 
hauling has been liberalized under COMESA 
initiatives, transit procedures are lengthy and have yet to be fully harmonized in the region.  
16. The Government is keen to promote 
more projects with a direct impact on economic growth and infrastructure 
development.  Mainstreaming of trade in the successor strategy to the Malawi Growth and Development Strategy 2006-11 will be 
important in this regard.  As part of this 
process, attention should be given to the future development of the services sector, in particular tourism, and the necessary investment in human capital to enable growth 
in services.